Personal Credit Scoring - An Introduction
By : Mark Waterson | ID: 50842 | Views : 199772 | Words: 560 | Rating : Not Rated The company to which they apply will use a points system to convert information from their application form and from credit reference agencies to work out whether they should approve their application. This points scoring system is known as the credit score. In general terms each financial services company will have a scale for scores. If an application exceeds a certain score it will be approved. If it doesn't then it may well be turned down.
How does credit scoring work?
The first thing to realise is that every financial services company could have a different way of working out a credit score and they can all rate scores in different ways. So, a consumer could make the same application to one company and be accepted but be turned down by another with the same score.
Credit scoring works on a points system based on information given on an application form reinforced by information from a credit reference agency. This information is a combination of 'lifestyle' factors and on how a consumer has historically managed their finances.
Positive points will be scored for owning a home, being married, being on the electoral register, living at the same address for a number of years, being in full-time employment and having a strong track record of making financial payments on time (and not missing any).
People will score fewer or negative points if they move home a lot, live in rented accommodation, aren't registered on the electoral roll, have missed or made late payments on financial products or have CCJs or a bankruptcy order, for example.
What do credit reference agencies do?
In the UK the three main credit reference agencies (Experian, Equifax and Callcredit) were set up to collate data on individuals. So, almost everybody in the UK will have a credit file with one/all of these companies. These agencies will give the information they hold to financial services companies whenever they need to build a credit score to assess an application. They will inform the company if a consumer has missed credit card payments, made a lot of applications for financial products in a short period or has not missed a mortgage payment to date, for example.
Can consumers access their credit reference information?
Every UK consumer has the right by law to see a report on the information that is held on them by a credit reference agency. To do this they will need to make an application to an agency to see the report -- at the moment the postal option for this costs just £2. Other methods of accessing this kind of information include taking out a monthly subscription to access the information held on them on an ongoing basis. Bear in mind that all three agencies must make changes to the information they hold on a consumer if the consumer can prove that it is incorrect.
Conclusion
As it is virtually impossible to work out which financial services providers will be more likely to approve an application, it is wise for consumers to check their credit score regularly to make sure everything is in order. They should also ensure that their credit score remains as high as possible by making any necessary payments on time and by not missing payments at any point.
How does credit scoring work?
The first thing to realise is that every financial services company could have a different way of working out a credit score and they can all rate scores in different ways. So, a consumer could make the same application to one company and be accepted but be turned down by another with the same score.
Credit scoring works on a points system based on information given on an application form reinforced by information from a credit reference agency. This information is a combination of 'lifestyle' factors and on how a consumer has historically managed their finances.
Positive points will be scored for owning a home, being married, being on the electoral register, living at the same address for a number of years, being in full-time employment and having a strong track record of making financial payments on time (and not missing any).
People will score fewer or negative points if they move home a lot, live in rented accommodation, aren't registered on the electoral roll, have missed or made late payments on financial products or have CCJs or a bankruptcy order, for example.
What do credit reference agencies do?
In the UK the three main credit reference agencies (Experian, Equifax and Callcredit) were set up to collate data on individuals. So, almost everybody in the UK will have a credit file with one/all of these companies. These agencies will give the information they hold to financial services companies whenever they need to build a credit score to assess an application. They will inform the company if a consumer has missed credit card payments, made a lot of applications for financial products in a short period or has not missed a mortgage payment to date, for example.
Can consumers access their credit reference information?
Every UK consumer has the right by law to see a report on the information that is held on them by a credit reference agency. To do this they will need to make an application to an agency to see the report -- at the moment the postal option for this costs just £2. Other methods of accessing this kind of information include taking out a monthly subscription to access the information held on them on an ongoing basis. Bear in mind that all three agencies must make changes to the information they hold on a consumer if the consumer can prove that it is incorrect.
Conclusion
As it is virtually impossible to work out which financial services providers will be more likely to approve an application, it is wise for consumers to check their credit score regularly to make sure everything is in order. They should also ensure that their credit score remains as high as possible by making any necessary payments on time and by not missing payments at any point.
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